When cryptocurrency started getting popular, it became a dream concept for the extreme libertarian block of the tech establishment that always wanted to get rid of the government-regulated currencies, and this led to the creation of Bitcoin, Mazacoin, Titcoin, and so on.
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The crypto crash
Cryptocurrencies have crashed for the second time in less than a month. On Thursday night, Bitcoin plunged to $38,242– its lowest value in six months.
Major altcoins have also registered sharp declines. Ethereum fell down by 8.71 percent, whereas Solana went down by 9.15 percent. Usually, Indian buyers step by buying after a dip in markets. But crypto investors and traders are spooked, and, therefore, the intensity of buying remains lukewarm compared to that in previous dips.
What is cryptocurrency? Why is it popular?
Cryptocurrency developed in aftermath of the failure of the traditional banking and financial system during the global financial crisis in 2008. The cryptocurrencies created an alternate, decentralized system in which transactions could be made without going through a central authority or a centralized ledger. The cryptocurrency concept employed blockchain technology.
Also, cryptocurrencies keep records of all transactions publicly available and stored on lots of different computers. In order to verify transactions, cryptographic algorithms are used where crypto miners come into play. They use their computers to carry out complex cryptographic work for adding new transactions to the ledger. In return, they get a small amount of cryptocurrency themselves.
And as I told you earlier, extreme libertarians who are uncomfortable with government regulation and control of Central Banks on prevailing currencies got too impressed with cryptocurrencies like Bitcoin, Mazacoin, and Titcoin.
How big is India’s cryptocurrency market?
India’s cryptocurrency market is very big. According to an estimate, Indians have invested more than Rs. 6,00,000 crores in the crypto market.
Currently, our country is estimated to be having more than 10 crore investors in cryptocurrency, the highest in the world.
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Why is it volatile?
The cryptocurrency market has become a reactionary market, reminiscent of that of current stock markets, however, the volatility factor is dialled up by a few hundred notches. A certain Elon Musk can turn a ‘Doge’ meme into ‘Dogecoin’ and highly influence its value with a few tweets, within seconds.
Also, there is not much finality on the status of cryptocurrency. Countries like China, Indonesia, Turkey, etc have imposed a blanket ban on selling, buying, or mining cryptocurrency in the country.
On the other hand, countries like El Salvador have embraced cryptocurrency and its associated blockchain technology with open arms. Various other countries like the USA and the EU have allowed cryptos with strong regulatory frameworks. The policies of different countries, therefore, tend to affect cryptocurrencies.
It is pertinent to note that if any scam or problem arises for an Indian individual while dealing with cryptocurrencies, that individual does not have a lot of avenues to go to and plead his case. The government is still in the process of formalising a regulatory structure and giving a security cushion to investors.
Recently, for example, Crypto.com investors weren’t able to log in after the platform was hit by a $34 million hack. If any such incident happens with Indian investors, they will have no proper legal remedy under the present circumstances.
What caused the latest crypto crash?
The latest crypto crash too was a result of the high volatility and uncertainty of the crypto market.
The Russian central bank’s proposal to ban the use and mining of cryptocurrencies pushed down crypto prices. The cryptocurrency market is already on thin ice with tight monetary policies by central banks across the world pushing cryptocurrencies into bear territory.
We are ultimately left at a stage, where even Indian investors too are becoming losers in the crypto craze. The crypto market is driven by a desire to earn huge amounts of money in the short run, something that puts many investors on course to big losses. The latest crash, however, shows how harmful crypto volatility can be.